<![CDATA[Artificial intelligence (AI) adoption is expanding among small and medium enterprises (SMEs), yet its contribution to innovation performance remains insufficiently understood. This study examined the associations between AI readiness, AI governance practices, employee digital capability, and innovation performance among technology-oriented SMEs in Surakarta, Indonesia. An explanatory sequential mixed-methods design was employed, involving 220 survey respondents analyzed using multiple linear regression with IBM SPSS Statistics 30 and 12 interview informants analyzed through thematic analysis. Results demonstrated significant positive associations between innovation performance and AI readiness (β = 0.343, p < .001), AI governance practices (β = 0.292, p < .001), and employee digital capability (β = 0.289, p < .001), explaining 47.0% of the variance (adjusted R² = 0.470). Qualitative findings highlighted infrastructure and data preparedness, responsible AI experimentation, and employees’ ability to translate AI applications into business improvements. Integrated findings indicated that these dimensions complement one another, although resource constraints may limit their effectiveness. Grounded in the Technology–Organization–Environment framework, this study provides empirical insights into the organizational conditions supporting AI-driven innovation in SMEs.]]>
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